US: Speaker Johnson Rules Out Putting Bipartisan Funding Bill On House Floor

Swiss August CPI is scheduled to be published tomorrow at 0730BST/0830CEST, with consensus for an unchanged 0.2% Y/Y and 0.0% M/M.

• An inline print would mean Swiss average Q3 inflation to date is 0.2%, marginally above the SNB's latest conditional inflation forecast for this quarter (0.1%), and would also represent the third consecutive month of the Y/Y measure coming in within the SNB's target range again (after having missed to the downside in May for the first time since March 2021).
• That means the bar for the September SNB meeting to become 'live' again is high. With implied odds of around 10% of a cut into negative territory, a material downward surprise in tomorrow's CPI release would be needed for a meaningful shift in expectations here.
• For the meetings further down the line, there is arguably more scope for Swiss CPI to slow enough to warrant a move into negative territory. However, it is worth recalling that Schlegel appeared quite cautious against further cuts at the last SNB meeting, flagging the challenges they would come with, and concluding that only a clear threat of inflation leaving the SNB's target range on a medium term would warrant such a move.
• If the inflation print were to come in well below expectations, focus should be in particular on services- and domestic inflation measures. These appear to be a key input in the SNB's assessment of medium-term inflationary pressures, and will thus filter into their judgement if inflation threatens to move out of the target range on a sustained basis. Services and domestic inflation continued to print positive throughout recent months (at 1.38% and 0.71%, respectively, in July). Housing inflation will also see its quarterly update (lastly at 2.6%).

The aforementioned DMO calendar update has allowed the 5s30s curve to take another leg lower, now at 148.3bps and -3.6bps flatter on the session.

• The spread reached a fresh multi-year high of 154.5bps just before 0900BST today.
• 30-year yields are almost 8bps lower on the session at 5.616%, after meeting resistance at 5.750% earlier.
• The reaction to this afternoon's US JOLTS data has also spilled over into Gilts, further helping lower yields across the curve.

MNI interviews an Employ America economist about the Fed's new framework -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com.